Ugly But Honest News 2-19-2017

In the week ending February 11, the advance figure for seasonally adjusted initial claims was 239,000, an increase of 5,000 from the previous week’s unrevised level of 234,000. The 4-week moving average was 245,250, an increase of 500 from the previous week’s revised average. The previous week’s average was revised up by 500 from 244,250 to 244,750.

The U.S. Census Bureau and the U.S. Department of Housing and Urban Development jointly announced the following new residential construction statistics for January 2017:

Building Permits

Privately-owned housing units authorized by building permits in January were at a seasonally adjusted annual rate of 1,285,000. This is 4.6 percent (±2.0 percent) above the revised December rate of 1,228,000 and is 8.2 percent (±1.6 percent) above the January 2016 rate of 1,188,000. Single-family authorizations in January were at a rate of 808,000; this is 2.7 percent (±1.9 percent) below the revised December figure of 830,000. Authorizations of units in buildings with five units or more were at a rate of 446,000 in January.

Housing Starts

Privately-owned housing starts in January were at a seasonally adjusted annual rate of 1,246,000. This is 2.6 percent (±11.0 percent)* below the revised December estimate of 1,279,000, but is 10.5 percent (±15.3 percent)* above the January 2016 rate of 1,128,000. Single-family housing starts in January were at a rate of 823,000; this is 1.9 percent (±10.8 percent)* above the revised December figure of 808,000. The January rate for units in buildings with five units or more was 421,000.

I deliberately used a long range chart so you can see where we are compared to where we were in the past. Obviously, we have a long way to go!

Home Builder Confidence Declined in February

Builder confidence in the market for newly-built single-family homes declined two points in February to a level of 65 on the National Association of Home Builders/Wells Fargo Housing Market Index (HMI).

While normally a decline is not good, they said this was actually the numbers “settling” back into a normal range. There is no doubt that the demand is strong in many markets for starter or entry level homes.

I paid for the appraisal so why can’t you give me a copy of it? This is a frequent question I get from homeowners who want a copy of their appraisal report. Today I want to clear up this confusing topic about who owns the appraisal report.

First off, I want to make sure that you know that the answer to this question will vary depending on who orders the appraisal. We’ll break down each scenario, so let’s get started.

Wishing that a problem doesn’t exist doesn’t make it vanish. But it does offer some insight into why the Republican Party was blindsided by the rise of Donald Trump and his populist appeal. It isn’t that the party elite was myopic, but that it actively fabricated a bubble into which no contrary information was allowed entry. The troubling thing is that the GOP is still at it.

Middle-class anxiety has been building for more than a decade and it mixed in the last election with a general sense of frustration with America’s leadership class. No wonder the middle class feels squeezed — because it is.

The amazing thing is that it appears that both the Democrats and Republicans still cannot understand how Trump won the election. Are they that oblivious?

Gains in black homeownership have been hard won, which amplifies our concern that in the last 15 years, black homeownership rates have declined to levels not seen since the 1960s, when private race-based discrimination was legal. Unless this setback to black homeownership is addressed, black families will rent for more years before homeownership than they did a few years ago. This will shrink the landscape of housing choice available to black families, increase their exposure to displacement, and delay or close off a key wealth-building mechanism.

Very distressing to see black home ownership decreasing since home ownership is a great way to build wealth. This much be worked on and the key is that whatever is done should be sustainable.

The average contract interest rate for 30-year fixed-rate mortgages with jumbo loan balances (greater than $424,100) increased to 4.28% from 4.27%, with points decreasing to 0.27 from 0.31 (including the origination fee) for 80 percent LTV loans.

The average contract interest rate for 15-year fixed-rate mortgages remained unchanged at 3.55%, with points increasing to 0.37 from 0.34 (including the origination fee) for 80 percent LTV loans.

No major changes in rates. How long mortgage rates remain at historically low levels is hard to say.

Total U.S. Weekly Rail Traffic Up 2.6% Compared With the Same Week Last Year

For this week, total U.S. weekly rail traffic was up 2.6 percent compared with the same week last year. Total carloads for the week ending February 11 was up 3.9 percent compared with the same week in 2016, while U.S. weekly intermodal volume was up 1.5 percent compared to 2016. Three of the 10 carload commodity groups posted an increase compared with the same week in 2016.

The delinquency rate for mortgage loans on one-to-four-unit residential properties increased to a seasonally adjusted rate of 4.80 percent of all loans outstanding at the end of the fourth quarter of 2016. The delinquency rate was up 28 basis points from the previous quarter, and was three basis points higher than one year ago.

The percentage of loans on which foreclosure actions were started during the fourth quarter was 0.28 percent, a decrease of two basis points from the previous quarter, and eight basis points lower than one year ago. This is the lowest rate of new foreclosures started since the fourth quarter of 1988.

Hopefully the increase in delinquencies is just a blip and the decrease in new foreclosures continues!

As of December 31, 2016, total household debt stood at $12.58 trillion, an increase of $226 billion (or 1.8 percent) from the third quarter of 2016. Total household debt is now just 0.8 percent ($99 billion) below its third quarter 2008 peak of $12.68 trillion, and 12.8 percent above the second quarter 2013 trough. For the year as a whole, household debt rose $460 billion, the strongest growth in nearly a decade, signaling continued improvement in credit conditions.

But debt looks very different in 2016 than it did the last time we saw this level of indebtedness. For the year as a whole, household debt rose $460 billion, the strongest growth in nearly a decade, signaling continued improvement in credit conditions. Mortgage debt rose $231 billion (or 2.8 percent) during 2016, although balances on home equity lines of credit (HELOCs) fell slightly, by about $14 billion (or 2.9 percent) for the year.

In 2008, mortgage and HELOC debt made up 79 percent of household liabilities, a figure that had been fueled by the rapid growth in house prices during the boom. Yet in this recovery, at least in the years leading up to 2016, the rebound in debt has been driven by student and auto debt, rather than housing debt. Now housing-secured debt makes up just 71 percent of total household liabilities, a level even lower than the 74 percent observed in 2003, as the housing boom was under way.

The good news is that the decrease in HELOCs may indicte that people are not using their homes as ATMs. The bad news is that the decrease in debt related to mortgages and HELOCs is largely due to fewer people owning homes.

The state of South Carolina experienced a strong year in both industry recruitment and international trade in 2016. From January to December, the state won 132 economic development projects, recruiting more than $3.4 billion in capital investment and approximately 13,100 new jobs. Additionally, South Carolina exporters posted a seventh consecutive record year with export sales of $31.3 billion – a $400 million increase over last year.

Excellent news and I would not be surprised to see even more investment in South Carolina in 2017. Th recent rejection of a union by Boeing employees will be a favorable indicator to many businesses. This could help to persuade them to locate or expand in South Carolina.

Today’s announcement that Federal Housing Administration mortgage delinquencies jumped at the end of 2016 shows President Trump made the right decision to suspend and review the outgoing Obama Administration’s lowering of FHA mortgage insurance premiums. Essentially as he was walking out the White House door and heading to his kitesurfing vacation in the Caribbean, President Obama put hardworking taxpayers at greater risk of another bailout. Thankfully, President Trump immediately recognized this danger and took decisive action on his first day in office. Lowering premiums at this time was a big mistake.

The sudden increase in delinquencies makes it clear that President Trump was absolutely right to undo the previous administration’s irresponsible action. It was just three years ago that taxpayers had to spend $1.7 billion to bail out the FHA. To be successful going forward, the FHA must be fiscally sound, with a clearly defined mission, to ensure homeownership opportunities for creditworthy first-time homebuyers and low-income families. Lowering FHA premiums at this time was counterproductive to achieving these goals and put the American taxpayer at greater risk. We need market-based sustainable rates.

Trump not letting this decrease occur was very unpopular with many in the housing industry. If we do finally see GSE reform, this change may have been short lived anyway.

JPMorgan Chase is gradually introducing a digital mortgage platform where customers can apply online and track applications by mobile phone. The tools will allow customers to submit and sign documents online and exchange messages with bank staff and real-estate agents so loans can close more quickly and easily.

While this may sound great, the Ugly But Honest truth is home buyers can benefit by sitting down face to face with several lender to discuss their options. And considering some of the horror stories about JPMorgan Chase regarding foreclosures and the housing market bust, I know I would not feel comfortable working with them…

That’s it for today!

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